Survey: Most Companies Still Struggle with Inventory Management

Jun 05, 2007 10:22 PM  By

A recent survey by Industry Directions, an enterprise technologies analyst firm, sheds new light on three common business pain points: forecast accuracy, overstocks, and expediting.

For instance, 83% of respondents said that overstocks were common in their organizations.

Another large majority, 73% of respondents, said expediting was common, with 40% adding that this problem was getting worse.

And 60% of respondents said their forecast accuracy was below 80%, even for time horizons as short as three months.

The results of the survey—conducted among 190 manufacturers, retailers, and distributors in February and March–shows a clear link between these issues and the need for improved inventory management practices.

Companies across a broad spectrum of manufacturing, distribution, and retail segments are striving to be more demand driven. The demand-driven strategy of allowing actual demand to pull inventory through the company and its supply chain seems simple. For those using traditional supply chain management practices, however, other corporate strategies, along with some outside forces, are making it a challenge to create a truly demand-driven supply and distribution network.

For instance, strategies such as increasing the pace of innovation and appealing to broader ranges of consumers are making product lifecycles shorter and expanding the product mix. Expanding the company’s sales reach, meanwhile, complicates distribution and fulfillment. And the addition of new audiences selecting from a broader range of products makes traditional forecasting by category, product family, or channel less effective.

What’s more, global sourcing is making supply lead times longer, and because of outsourcing, companies have become more dependent on their trading partners. New regulations, new competition, and new technologies also factor in to make a very complex equation.

Most respondents to this study, according to Industry Directions, are still operating in a relatively traditional fashion, reviewing processes and performance, inventory, and service-level targets infrequently. A majority have planning software but not other applications that support dynamic, demand-driven response. Top-performing companies in the study were more likely to use these practices and software.